Canada very similar to U.S. however under the temporal method some translations adjustments can be deferred and amortized.
Mexico standards are silent but SFAS 52 is commonly followed. In cases where it is not practice varies widely.
Brazil current rate method is used with gains and losses included in income.
Japan significantly different from U.S. GAAP and IFRSs with cumulative translation adjustment reported as an asset or liability.
Korea only the current rate method is used.
Learning Objective 7 47 One final problem
How do we interpret reported FC gains and losses irrespective of where they show up
Example Company has a large subsidiary in the EU. The subsidiary has a large net asset position. The Euro depreciates more than 40. Huge losses are reported.
The subsidiarys sales and profits skyrocket since they now seem more competitive to customers than ever.
48 Thus and strangely
In a world of floating rate currency sometimes a weak currency is good and a strong currency is bad!
This explains why when markets are tight or declining nations compete with each other in a race to devalue their money the most!
All kinds of problems arise when the value of money changes and is uncertain.
The economic impact of these changes vary as a function of the inherent cause of the FC movement and the type of holding (asset/liability monetary/non-monetary current/noncurrent).
Accounting limitations (e.g. historical cost) mix with this uncertainty making financial reporting difficult at best.
The current paradigm is SFAS 52. This could easily change at any time as it has several times before.
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